Honda Motor (HMC) 6-K Current report (foreign)

No.1-7628

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

FOR THE MONTH OF AUGUST 2020

COMMISSION FILE NUMBER: 1-07628

HONDA GIKEN KOGYO KABUSHIKI KAISHA

(Name of registrant)

HONDA MOTOR CO., LTD.

(Translation of registrant’s name into English)

1-1, Minami-Aoyama 2-chome, Minato-ku, Tokyo 107-8556, Japan

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F  ☒    Form 40-F  ☐    

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

Contents

On August 6, 2020, Honda Motor Co., Ltd. filed its consolidated financial statements for the fiscal first quarter ended June 30, 2020 with Financial Services Agency in Japan.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HONDA GIKEN KOGYO KABUSHIKI KAISHA

(HONDA MOTOR CO., LTD.)

/s/ Masao Kawaguchi

Masao Kawaguchi

General Manager

Finance Division

Honda Motor Co., Ltd.

Date: August 25, 2020

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Financial Statements

June 30, 2020

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Financial Results

Overview of Operating Performance

The spread of coronavirus disease 2019 (COVID-19) has caused the global economic slowdown and also has affected Honda’s consolidated financial results for the three months ended June 30, 2020.

Resulting from travel restriction measures by government, Honda’s production bases in Japan and overseas were also affected by suspended or reduced production mainly due to restrictions on employees’ commute to the workplaces and delays in the supply of parts within the supply chain. Some dealers in Japan and overseas were obliged to suspend business, shorten business hours, or reduce services such as inspections and repairs.

Honda’s consolidated sales revenue for the three months ended June 30, 2020 decreased by 46.9%, to ¥2,123.7 billion from the same period last year, due mainly to decreased sales revenue in all business operations. Operating loss was ¥113.6 billion, a decrease of ¥366.1 billion from the same period last year, due mainly to a decrease in profit attributable to decreased sales revenue and model mix, which was partially offset by decreased selling, general and administrative expenses. Loss before income taxes was ¥73.4 billion, a decrease of ¥363.2 billion from the same period last year. Loss for the period attributable to owners of the parent was ¥80.8 billion, a decrease of ¥253.1 billion from the same period last year.

Business Segments

Motorcycle Business

For the three months ended June 30, 2019 and 2020

	Units (thousands)
	Honda Group Unit Sales*										Consolidated Unit Sales*
	Three months ended Jun. 30, 2019		Three months ended Jun. 30, 2020								Three months ended Jun. 30, 2019		Three months ended Jun. 30, 2020
					Change			%							Change			%
Motorcycle Business		4,921		1,855		(3,066	)		(62.3	)		3,264		1,221		(2,043	)		(62.6	)
Japan		51		50		(1	)		(2.0	)		51		50		(1	)		(2.0	)
North America		74		61		(13	)		(17.6	)		74		61		(13	)		(17.6	)
Europe		84		61		(23	)		(27.4	)		84		61		(23	)		(27.4	)
Asia		4,378		1,572		(2,806	)		(64.1	)		2,721		938		(1,783	)		(65.5	)
Other Regions		334		111		(223	)		(66.8	)		334		111		(223	)		(66.8	)

* Honda Group Unit Sales is the total unit sales of completed motorcycle, ATV and side-by-side products of Honda, its consolidated subsidiaries and its affiliates and joint ventures accounted for using the equity method. Consolidated Unit Sales is the total unit sales of completed products corresponding to consolidated sales revenue to external customers, which consists of unit sales of completed products of Honda and its consolidated subsidiaries.

Sales revenue from external customers decreased by 48.6%, to ¥274.2 billion from the same period last year, due mainly to decreased consolidated unit sales. Operating profit decreased by 84.0%, to ¥11.2 billion from the same period last year, due mainly to a decrease in profit attributable to decreased sales volume and model mix, which was partially offset by decreased selling, general and administrative expenses.

Automobile Business

For the three months ended June 30, 2019 and 2020

	Units (thousands)
	Honda Group Unit Sales*										Consolidated Unit Sales*
	Three months ended Jun. 30, 2019		Three months ended Jun. 30, 2020								Three months ended Jun. 30, 2019		Three months ended Jun. 30, 2020
					Change			%							Change			%
Automobile Business		1,321		792		(529	)		(40.0	)		905		337		(568	)		(62.8	)
Japan		181		129		(52	)		(28.7	)		161		113		(48	)		(29.8	)
North America		495		159		(336	)		(67.9	)		495		159		(336	)		(67.9	)
Europe		34		16		(18	)		(52.9	)		34		16		(18	)		(52.9	)
Asia		554		473		(81	)		(14.6	)		158		34		(124	)		(78.5	)
Other Regions		57		15		(42	)		(73.7	)		57		15		(42	)		(73.7	)

* Honda Group Unit Sales is the total unit sales of completed products of Honda, its consolidated subsidiaries and its affiliates and joint ventures accounted for using the equity method. Consolidated Unit Sales is the total unit sales of completed products corresponding to consolidated sales revenue to external customers, which consists of unit sales of completed products of Honda and its consolidated subsidiaries. Certain sales of automobiles that are financed with residual value type auto loans by our Japanese finance subsidiaries and sold through our consolidated subsidiaries are accounted for as operating leases in conformity with IFRS and are not included in consolidated sales revenue to the external customers in our Automobile business. Accordingly, they are not included in Consolidated Unit Sales, but are included in Honda Group Unit Sales of our Automobile business.

Sales revenue from external customers decreased by 55.1%, to ¥1,209.9 billion from the same period last year, due mainly to decreased consolidated unit sales. Operating loss was ¥195.8 billion, a decrease of ¥316.2 billion from the same period last year, due mainly to a decrease in profit attributable to decreased sales volume and model mix, which was partially offset by decreased selling, general and administrative expenses.

Financial Services Business

Sales revenue from external customers decreased by 16.4%, to ¥575.8 billion from the same period last year, due mainly to a decrease in revenues on disposition of lease vehicles. Operating profit increased by 8.8%, to ¥71.5 billion from the same period last year, due mainly to decreased selling, general and administrative expenses.

Life Creation and Other Businesses

For the three months ended June 30, 2019 and 2020

	Units (thousands)
	Honda Group Unit Sales / Consolidated Unit Sales*
	Three months ended Jun. 30, 2019		Three months ended Jun. 30, 2020
					Change			%
Life Creation Business		1,280		1,083		(197	)		(15.4	)
Japan		74		80		6			8.1
North America		605		524		(81	)		(13.4	)
Europe		198		170		(28	)		(14.1	)
Asia		347		257		(90	)		(25.9	)
Other Regions		56		52		(4	)		(7.1	)

* Honda Group Unit Sales is the total unit sales of completed power products of Honda, its consolidated subsidiaries and its affiliates and joint ventures accounted for using the equity method. Consolidated Unit Sales is the total unit sales of completed power products corresponding to consolidated sales revenue to external customers, which consists of unit sales of completed power products of Honda and its consolidated subsidiaries. In Life creation business, there is no discrepancy between Honda Group Unit Sales and Consolidated Unit Sales since no affiliate and joint venture accounted for using the equity method were involved in the sale of Honda power products.

Sales revenue from external customers decreased by 20.6%, to ¥63.7 billion from the same period last year, due mainly to decreased consolidated unit sales in Life creation business. Operating loss was ¥0.5 billion, an improvement of ¥2.9 billion from the same period last year, due mainly to decreased research and development expenses as well as decreased selling, general and administrative expenses, which was partially offset by a decrease in profit attributable to decreased sales volume and model mix. In addition, operating loss of aircraft and aircraft engines included in the Life creation and other businesses was ¥7.1 billion, an improvement of ¥2.0 billion from the same period last year.

Cash Flows

Consolidated cash and cash equivalents on June 30, 2020 decreased by ¥64.5 billion from March 31, 2020, to ¥2,607.7 billion. The reasons for the increases or decreases for each cash flow activity, when compared with the same period last year, are as follows:

Net cash used in operating activities amounted to ¥71.7 billion of cash outflows. Cash outflows from operating activities increased by ¥267.3 billion from the same period last year, due mainly to a decrease in cash received from customers, despite decreased payments for parts and raw materials.

Net cash used in investing activities amounted to ¥109.3 billion of cash outflows. Cash outflows from investing activities decreased by ¥58.8 billion from the same period last year, due mainly to decreased payments for acquisitions of other financial assets as well as decreased payments for additions to property, plant and equipment.

Net cash provided by financing activities amounted to ¥111.9 billion of cash inflows. Cash inflows from financing activities increased by ¥195.7 billion from the same period last year, due mainly to increased proceeds from financing liabilities.

Research and Development

The changes in research and development activities by Honda and its subsidiaries for the three months ended June 30, 2020 are as follows:

Honda and the automobile product development division excluding the design function etc. of Honda R&D Co., Ltd. were integrated and Honda merged with Honda Engineering Co., Ltd., with an aim to transition from the current structure where sales, manufacturing, development and procurement divisions operate independently to a new structure where each process of planning and concept making, development, launch and mass-production of a new product are coordinated closely. In addition, the Innovative Research Excellence – Power Unit & Energy center and the Design center were newly established in Honda R&D Co., Ltd. In the area of power unit technologies, which is a source of Honda’s competitive strength, the Innovative Research Excellence – Power Unit & Energy center will fully demonstrate the strengths of Honda as a company that has a broad range of technologies and strive to increase the value of its product for the future with integration of research and development functions for power unit and energy technologies for motorcycles, automobiles, power products and business jets. The Design center will strengthen the consistent Honda brand across products with integration of design functions for products of motorcycles, automobiles and life creation as well.

Employees

The number of employees of Honda as of June 30, 2020 increased by 10,912, to 36,291 from March 31, 2020, due mainly to the integration of Honda and the automobile product development division excluding the design function etc. of Honda R&D Co., Ltd. and the merger with Honda Engineering Co., Ltd. by Honda in Automobile business. There was no significant changes in the total number of employees of Honda and its subsidiaries for the three months ended June 30, 2020.

Unit Production and Sales

Unit production and sales in Honda and its subsidiaries for the three months ended June 30, 2020 in Motorcycle business, Automobile business and Life creation business decreased significantly from the same period last year. The decreased unit production in each segment was due to suspended or reduced production in Honda’s production bases in Japan and overseas resulted from the spread of COVID-19. For the decreased unit sales in each segment, see “Business Segment” in “Consolidated Financial Results”.

Plans for Capital Expenditures for Fiscal Year 2021

Our management mainly considers economic trends of each region, demand trends, situation of competitors and our business strategy such as introduction plans of new models in determining the future of projects.

The estimated amounts of capital expenditures for the fiscal year ending March 31, 2021 are shown below.

	Fiscal year ending March 31, 2021
	Yen (millions)
Motorcycle Business	¥	32,600
Automobile Business		305,600
Financial Services Business		200
Life Creation and Other Businesses		11,600
Total	¥	350,000

Explanatory notes:

1. There is no plan for significant disposal of assets except ordinary modernization of production facilities.

2. Capital requirement will be covered by own funds and loans.

3. The estimated amount of capital expenditures for Financial services business in the above table does not include equipment on operating leases.

4. Intangible assets are not included in the table above.

In Motorcycle business, we will make capital expenditures of ¥32,600 million in the fiscal year ending March 31, 2021. Funds will be allocated to the introduction of new models, as well as the improvement, streamlining and modernization of production facilities, and improvement of sales and R&D facilities.

In Automobile business, we will make capital expenditures of ¥305,600 million in the fiscal year ending March 31, 2021. Funds will be allocated to the introduction of new models, as well as the improvement, streamlining and modernization of production facilities, and improvement of sales and R&D facilities.

In Financial services business, we will make capital expenditures of ¥200 million in the fiscal year ending March 31, 2021.

In Life creation business, we will make capital expenditures of ¥11,600 million in the fiscal year ending March 31, 2021. Funds will be allocated to the improvement, streamlining and modernization of production facilities, and improvement of R&D facilities.

There is no decision relating to plans for significant capital expenditures for the three months ended June 30, 2020.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Financial Position

March 31, 2020 and June 30, 2020

		Yen (millions)
Assets	Note	March 31, 2020			June 30, 2020
		unaudited			unaudited
Current assets:
Cash and cash equivalents		¥	2,672,353		¥	2,607,760
Trade receivables			633,909			609,222
Receivables from financial services			1,878,358			1,684,860
Other financial assets			190,053			176,902
Inventories			1,560,568			1,651,700
Other current assets			365,769			334,919
Total current assets			7,301,010			7,065,363
Non-current assets:
Investments accounted for using the equity method			655,475			675,141
Receivables from financial services			3,282,807			3,262,447
Other financial assets			441,724			469,325
Equipment on operating leases	5		4,626,063			4,587,433
Property, plant and equipment	6		3,051,704			2,991,499
Intangible assets			760,434			772,428
Deferred tax assets			132,553			87,384
Other non-current assets			209,695			200,714
Total non-current assets			13,160,455			13,046,371
Total assets		¥	20,461,465		¥	20,111,734
		Yen (millions)
Liabilities and Equity	Note	March 31, 2020			June 30, 2020
		unaudited			unaudited
Current liabilities:
Trade payables		¥	958,469		¥	781,767
Financing liabilities			3,248,457			3,334,751
Accrued expenses			449,716			372,092
Other financial liabilities			209,065			221,456
Income taxes payable			43,759			41,489
Provisions	7		287,175			267,787
Other current liabilities			593,447			530,972
Total current liabilities			5,790,088			5,550,314
Non-current liabilities:
Financing liabilities			4,221,229			4,308,804
Other financial liabilities			303,570			302,042
Retirement benefit liabilities			578,909			588,867
Provisions	7		238,439			245,811
Deferred tax liabilities			698,868			638,493
Other non-current liabilities			344,339			340,495
Total non-current liabilities			6,385,354			6,424,512
Total liabilities			12,175,442			11,974,826
Equity:
Common stock			86,067			86,067
Capital surplus			171,823			171,811
Treasury stock			(273,940	)		(273,817	)
Retained earnings			8,142,948			8,013,714
Other components of equity			(114,639	)		(113,535	)
Equity attributable to owners of the parent			8,012,259			7,884,240
Non-controlling interests			273,764			252,668
Total equity			8,286,023			8,136,908
Total liabilities and equity		¥	20,461,465		¥	20,111,734

See accompanying notes to condensed consolidated interim financial statements.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

For the three months ended June 30, 2019 and 2020

		Yen (millions)
	Note	June 30, 2019			June 30, 2020
		unaudited			unaudited
Sales revenue	8	¥	3,996,253		¥	2,123,775
Operating costs and expenses:
Cost of sales			(3,166,483	)		(1,769,299	)
Selling, general and administrative			(407,449	)		(305,253	)
Research and development			(169,852	)		(162,914	)
Total operating costs and expenses			(3,743,784	)		(2,237,466	)
Operating profit (loss)			252,469			(113,691	)
Share of profit of investments accounted for using the equity method			44,230			39,994
Finance income and finance costs:
Interest income			14,195			4,595
Interest expense			(3,595	)		(1,833	)
Other, net			(17,488	)		(2,498	)
Total finance income and finance costs			(6,888	)		264
Profit (loss) before income taxes			289,811			(73,433	)
Income tax expense			(100,219	)		(6,546	)
Profit (loss) for the period		¥	189,592		¥	(79,979	)
Profit (loss) for the period attributable to:
Owners of the parent			172,302			(80,871	)
Non-controlling interests			17,290			892
		Yen
		June 30, 2019			June 30, 2020
Earnings (loss) per share attributable to owners of the parent
Basic and diluted	11	¥	97.92		¥	(46.84	)

See accompanying notes to condensed consolidated interim financial statements.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

For the three months ended June 30, 2019 and 2020

		Yen (millions)
	Note	June 30, 2019			June 30, 2020
		unaudited			unaudited
Profit (loss) for the period		¥	189,592		¥	(79,979	)
Other comprehensive income, net of tax:
Items that will not be reclassified to profit or loss
Remeasurements of defined benefit plans			—			—
Net changes in revaluation of financial assets measured at fair value through other comprehensive income			(6,348	)		4,209
Share of other comprehensive income of investments accounted for using the equity method			(825	)		529
Items that may be reclassified subsequently to profit or loss
Net changes in revaluation of financial assets measured at fair value through other comprehensive income			110			56
Exchange differences on translating foreign operations			(129,218	)		8,819
Share of other comprehensive income of investments accounted for using the equity method			(14,259	)		(5,193	)
Total other comprehensive income, net of tax			(150,540	)		8,420
Comprehensive income for the period		¥	39,052		¥	(71,559	)
Comprehensive income for the period attributable to:
Owners of the parent			28,277			(79,767	)
Non-controlling interests			10,775			8,208

See accompanying notes to condensed consolidated interim financial statements.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Equity

For the three months ended June 30, 2019 and 2020

			Yen (millions)
			Equity attributable to owners of the parent
	Note		Common stock		Capital surplus		Treasury stock			Retained earnings			Other components of equity			Total			Non-controlling interests			Total equity
Balance as of April 1, 2019 (unaudited)			¥	86,067	¥	171,460	¥	(177,827	)	¥	7,973,637		¥	214,383		¥	8,267,720		¥	298,070		¥	8,565,790
Comprehensive income for the period
Profit (loss) for the period											172,302						172,302			17,290			189,592
Other comprehensive income, net of tax														(144,025	)		(144,025	)		(6,515	)		(150,540	)
Total comprehensive income for the period											172,302			(144,025	)		28,277			10,775			39,052
Reclassification to retained earnings											(2	)		2			—						—
Transactions with owners and other
Dividends paid		12									(49,287	)					(49,287	)		(44,226	)		(93,513	)
Purchases of treasury stock								(3	)								(3	)					(3	)
Disposal of treasury stock								79									79						79
Share-based payment transactions						78											78						78
Total transactions with owners and other						78		76			(49,287	)					(49,133	)		(44,226	)		(93,359	)
Other changes											176						176						176
Balance as of June 30, 2019 (unaudited)			¥	86,067	¥	171,538	¥	(177,751	)	¥	8,096,826		¥	70,360		¥	8,247,040		¥	264,619		¥	8,511,659

			Yen (millions)
			Equity attributable to owners of the parent
	Note		Common stock		Capital surplus			Treasury stock			Retained earnings			Other components of equity			Total			Non-controlling interests			Total equity
Balance as of April 1, 2020 (unaudited)			¥	86,067	¥	171,823		¥	(273,940	)	¥	8,142,948		¥	(114,639	)	¥	8,012,259		¥	273,764		¥	8,286,023
Comprehensive income for the period
Profit (loss) for the period												(80,871	)					(80,871	)		892			(79,979	)
Other comprehensive income, net of tax															1,104			1,104			7,316			8,420
Total comprehensive income for the period												(80,871	)		1,104			(79,767	)		8,208			(71,559	)
Transactions with owners and other
Dividends paid		12										(48,363	)					(48,363	)		(31,555	)		(79,918	)
Purchases of treasury stock									(1	)								(1	)					(1	)
Disposal of treasury stock									124									124						124
Share-based payment transactions						(12	)											(12	)					(12	)
Equity transactions and others																					2,251			2,251
Total transactions with owners and other						(12	)		123			(48,363	)					(48,252	)		(29,304	)		(77,556	)
Balance as of June 30, 2020 (unaudited)			¥	86,067	¥	171,811		¥	(273,817	)	¥	8,013,714		¥	(113,535	)	¥	7,884,240		¥	252,668		¥	8,136,908

See accompanying notes to condensed consolidated interim financial statements.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

For the three months ended June 30, 2019 and 2020

		Yen (millions)
	Note	June 30, 2019			June 30, 2020
		unaudited			unaudited
Cash flows from operating activities:
Profit (loss) before income taxes		¥	289,811		¥	(73,433	)
Depreciation, amortization and impairment losses excluding equipment on operating leases			170,016			149,419
Share of profit of investments accounted for using the equity method			(44,230	)		(39,994	)
Finance income and finance costs, net			(9,127	)		6,752
Interest income and interest costs from financial services, net			(32,344	)		(28,354	)
Changes in assets and liabilities
Trade receivables			9,919			33,546
Inventories			(12,930	)		(91,946	)
Trade payables			(53,045	)		(134,776	)
Accrued expenses			(34,712	)		(87,180	)
Provisions and retirement benefit liabilities			10,907			9,395
Receivables from financial services			6,582			199,194
Equipment on operating leases			(53,086	)		16,833
Other assets and liabilities			(83,469	)		(35,335	)
Other, net			1,866			(2,402	)
Dividends received			26,632			5,468
Interest received			73,532			58,567
Interest paid			(32,873	)		(27,577	)
Income taxes paid, net of refunds			(37,861	)		(29,945	)
Net cash provided by (used in) operating activities			195,588			(71,768	)
Cash flows from investing activities:
Payments for additions to property, plant and equipment			(97,415	)		(84,090	)
Payments for additions to and internally developed intangible assets			(58,172	)		(50,151	)
Proceeds from sales of property, plant and equipment and intangible assets			7,885			3,231
Payments for acquisitions of subsidiaries, net of cash and cash equivalents acquired			—			2,230
Payments for acquisitions of investments accounted for using the equity method			(2,401	)		—
Payments for acquisitions of other financial assets			(60,055	)		(38,460	)
Proceeds from sales and redemptions of other financial assets			42,018			57,920
Net cash used in investing activities			(168,140	)		(109,320	)
Cash flows from financing activities:
Proceeds from short-term financing liabilities			2,049,304			2,847,881
Repayments of short-term financing liabilities			(2,318,708	)		(2,687,827	)
Proceeds from long-term financing liabilities			494,872			405,004
Repayments of long-term financing liabilities			(219,727	)		(376,788	)
Dividends paid to owners of the parent			(49,287	)		(48,363	)
Dividends paid to non-controlling interests			(22,967	)		(9,282	)
Purchases and sales of treasury stock, net			76			123
Repayments of lease liabilities			(17,400	)		(18,291	)
Other, net			2			(555	)
Net cash provided by (used in) financing activities			(83,835	)		111,902
Effect of exchange rate changes on cash and cash equivalents			(46,546	)		4,593
Net change in cash and cash equivalents			(102,933	)		(64,593	)
Cash and cash equivalents at beginning of year			2,494,121			2,672,353
Cash and cash equivalents at end of period		¥	2,391,188		¥	2,607,760

See accompanying notes to condensed consolidated interim financial statements.

1

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

(1) Reporting Entity

Honda Motor Co., Ltd. (the “Company”) is a public company domiciled in Japan. The Company and its subsidiaries (collectively “Honda”) develop, manufacture and distribute motorcycles, automobiles, power products and others throughout the world, and also provide financial services to customers and dealers for the sale of those products. Principal manufacturing facilities are located in Japan, the United States of America, Canada, Mexico, the United Kingdom, Turkey, Italy, France, China, India, Indonesia, Malaysia, Thailand, Vietnam, Argentina and Brazil.

(2) Basis of Preparation

 (a) Compliance with Interim Financial Reporting Standards

The condensed consolidated interim financial statements of the Company have been prepared in accordance with IAS 34 “Interim Financial Reporting”. The condensed consolidated interim financial statements should be read in conjunction with the Company’s consolidated financial statements for the fiscal year ended March 31, 2020, since the condensed consolidated interim financial statements do not include all the information required in the annual consolidated financial statements, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.

 (b) Functional Currency and Presentation Currency

The condensed consolidated interim financial statements are presented in Japanese yen, which is the functional currency of the Company. All financial information presented in Japanese yen has been rounded to the nearest million Japanese yen, except when otherwise indicated.

 (c) Use of Estimates and Judgments

The preparation of condensed consolidated interim financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies, the reported amount of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results could differ from these estimates. These estimates and underlying assumptions are reviewed on a continuous basis. Changes in these accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

The condensed consolidated interim financial statements are prepared based on the same judgments and estimations as those applied and described in the Company’s consolidated financial statements for the fiscal year ended March 31, 2020.

(3) Summary of Significant Accounting Policies

The condensed consolidated interim financial statements are prepared based on the same accounting policies as those applied and described in the Company’s consolidated financial statements for the fiscal year ended March 31, 2020.

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HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

(4) Segment Information

Honda has four reportable segments: Motorcycle business, Automobile business, Financial services business and Life creation and other businesses, which are based on Honda’s organizational structure and characteristics of products and services. Operating segments are defined as the components of Honda for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The accounting policies used for these reportable segments are consistent with the accounting policies used in the Company’s condensed consolidated interim financial statements.

Principal products and services, and functions of each segment are as follows:

Segment	Principal products and services	Functions
Motorcycle Business	Motorcycles, all-terrain vehicles (ATVs), side-by-sides (SxS) and relevant parts	Research and development Manufacturing Sales and related services
Automobile Business	Automobiles and relevant parts	Research and development Manufacturing Sales and related services
Financial Services Business	Financial services	Retail loan and lease related to Honda products Others
Life Creation and Other Businesses	Power products and relevant parts, and others	Research and development Manufacturing Sales and related services Others

   (a) Segment Information

Segment information as of and for the three months ended June 30, 2019 and 2020 is as follows:

As of and for the three months ended June 30, 2019

	Yen (millions)
	Motorcycle Business		Automobile Business		Financial Services Business		Life Creation and Other Businesses			Segment Total		Reconciling Items			Consolidated
Sales revenue:
External customers	¥	533,018	¥	2,694,478	¥	688,401	¥	80,356		¥	3,996,253	¥	—		¥	3,996,253
Intersegment		—		55,662		3,624		4,888			64,174		(64,174	)		—
Total		533,018		2,750,140		692,025		85,244			4,060,427		(64,174	)		3,996,253
Segment profit (loss)	¥	69,873	¥	120,375	¥	65,782	¥	(3,561	)	¥	252,469	¥	—		¥	252,469
Segment assets	¥	1,500,514	¥	8,104,744	¥	10,076,682	¥	338,134		¥	20,020,074	¥	286,628		¥	20,306,702
Depreciation and amortization		17,072		146,891		206,866		3,579			374,408		—			374,408
Capital expenditures		13,552		101,076		576,451		3,058			694,137		—			694,137

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HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

As of and for the three months ended June 30, 2020

	Yen (millions)
	Motorcycle Business		Automobile Business			Financial Services Business		Life Creation and Other Businesses			Segment Total			Reconciling Items			Consolidated
Sales revenue:
External customers	¥	274,222	¥	1,209,923		¥	575,834	¥	63,796		¥	2,123,775		¥	—		¥	2,123,775
Intersegment		—		45,800			3,168		4,441			53,409			(53,409	)		—
Total		274,222		1,255,723			579,002		68,237			2,177,184			(53,409	)		2,123,775
Segment profit (loss)	¥	11,202	¥	(195,888	)	¥	71,568	¥	(573	)	¥	(113,691	)	¥	—		¥	(113,691	)
Segment assets	¥	1,386,342	¥	7,641,611		¥	10,202,227	¥	352,249		¥	19,582,429		¥	529,305		¥	20,111,734
Depreciation and amortization		16,775		126,793			206,150		3,888			353,606			—			353,606
Capital expenditures		8,550		89,371			396,701		2,082			496,704			—			496,704

Explanatory notes:

1. Segment profit (loss) of each segment is measured in a consistent manner with consolidated operating profit, which is profit before income taxes before share of profit of investments accounted for using the equity method and finance income and finance costs. Expenses not directly associated with specific segments are allocated based on the most reasonable measures applicable.

2. Segment assets of each segment are defined as total assets including investments accounted for using the equity method, derivatives, and deferred tax assets. Segment assets are based on those directly associated with each segment and those not directly associated with specific segments are allocated based on the most reasonable measures applicable except for the corporate assets described below.

3. Intersegment sales revenues are generally made at values that approximate arm’s-length prices.

4. Reconciling items include elimination of intersegment transactions and balances as well as unallocated corporate assets. Unallocated corporate assets, included in reconciling items as of June 30, 2019 and 2020 amounted to ¥551,689 million and ¥820,941 million, respectively, which consist primarily of the Company’s cash and cash equivalents and financial assets measured at fair value through other comprehensive income.

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HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

    (b) Supplemental Geographical Information

In addition to the disclosure required by IFRS, Honda provides the following supplemental information for the financial statements users:

Supplemental geographical information based on the location of the Company and its subsidiaries

As of and for the three months ended June 30, 2019

	Yen (millions)
	Japan		North America		Europe		Asia		Other Regions		Total		Reconciling Items			Consolidated
Sales revenue:
External customers	¥	594,300	¥	2,213,126	¥	155,392	¥	844,102	¥	189,333	¥	3,996,253	¥	—		¥	3,996,253
Inter-geographic areas		556,455		102,919		50,838		175,163		1,943		887,318		(887,318	)		—
Total		1,150,755		2,316,045		206,230		1,019,265		191,276		4,883,571		(887,318	)		3,996,253
Operating profit (loss)	¥	36,672	¥	102,701	¥	2,600	¥	97,961	¥	8,479	¥	248,413	¥	4,056		¥	252,469
Assets	¥	4,766,236	¥	11,200,662	¥	639,831	¥	3,043,833	¥	619,899	¥	20,270,461	¥	36,241		¥	20,306,702
Non-current assets other than financial instruments, deferred tax assets and net defined benefit assets	¥	2,922,170	¥	4,653,618	¥	94,351	¥	673,137	¥	142,292	¥	8,485,568	¥	—		¥	8,485,568

As of and for the three months ended June 30, 2020

	Yen (millions)
	Japan			North America			Europe		Asia		Other Regions			Total			Reconciling Items			Consolidated
Sales revenue:
External customers	¥	471,450		¥	1,061,689		¥	90,628	¥	444,317	¥	55,691		¥	2,123,775		¥	—		¥	2,123,775
Inter-geographic areas		295,730			78,816			14,109		89,674		524			478,853			(478,853	)		—
Total		767,180			1,140,505			104,737		533,991		56,215			2,602,628			(478,853	)		2,123,775
Operating profit (loss)	¥	(61,934	)	¥	(77,886	)	¥	4,854	¥	23,303	¥	(5,576	)	¥	(117,239	)	¥	3,548		¥	(113,691	)
Assets	¥	4,712,594		¥	11,123,120		¥	682,541	¥	2,799,058	¥	473,595		¥	19,790,908		¥	320,826		¥	20,111,734
Non-current assets other than financial instruments, deferred tax assets and net defined benefit assets	¥	2,991,617		¥	4,672,911		¥	57,515	¥	661,518	¥	106,492		¥	8,490,053		¥	—		¥	8,490,053

Explanatory notes:

1. Major countries in each geographic area:

North America	United States, Canada, Mexico
Europe	United Kingdom, Germany, Belgium, Italy, France
Asia	Thailand, Indonesia, China, India, Vietnam
Other Regions	Brazil, Australia

2. Operating profit (loss) of each geographical region is measured in a consistent manner with consolidated operating profit, which is profit before income taxes before share of profit of investments accounted for using the equity method and finance income and finance costs.

3. Assets of each geographical region are defined as total assets including investments accounted for using the equity method, derivatives, and deferred tax assets.

4. Sales revenues between geographic areas are generally made at values that approximate arm’s-length prices.

5. Reconciling items include elimination of inter-geographic transactions and balances as well as unallocated corporate assets. Unallocated corporate assets, included in reconciling items as of June 30, 2019 and 2020 amounted to ¥551,689 million and ¥820,941 million, respectively, which consist primarily of the Company’s cash and cash equivalents and financial assets measured at fair value through other comprehensive income.

5

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

(5) Equipment on Operating Leases

The additions to equipment on operating leases for the three months ended June 30, 2019 and 2020 are ¥575,586 million and ¥395,691 million, respectively.

The sales or disposals of equipment on operating leases for the three months ended June 30, 2019 and 2020 are ¥313,409 million and ¥211,419 million, respectively.

(6) Property, Plant and Equipment

The additions to property, plant and equipment for the three months ended June 30, 2019 and 2020 are ¥71,555 million and ¥60,844 million, respectively.

The sales or disposals of property, plant and equipment for the three months ended June 30, 2019 and 2020 are ¥10,462 million and ¥9,441 million, respectively.

(7) Provisions

The components of and changes in provisions for the three months ended June 30, 2020 are as follows:

	Yen (millions)
	Product warranties*			Other			Total
Balance as of April 1, 2020	¥	380,689		¥	144,925		¥	525,614
Provision	¥	34,863		¥	3,207		¥	38,070
Write-offs		(32,480	)		(13,100	)		(45,580	)
Reversal		(1,168	)		(2,474	)		(3,642	)
Exchange differences on translating foreign operations		(56	)		(808	)		(864	)
Balance as of June 30, 2020	¥	381,848		¥	131,750		¥	513,598

Current liabilities and non-current liabilities of provisions as of March 31, 2020 and June 30, 2020 are as follows:

	Yen (millions)
	As of March 31, 2020		As of June 30, 2020
Current liabilities	¥	287,175	¥	267,787
Non-current liabilities		238,439		245,811
Total	¥	525,614	¥	513,598

Explanatory notes:

* Honda recognizes provisions for product warranties to cover future product warranty expenses. Honda recognizes costs for general warranties on products Honda sells and for specific warranty programs, including product recalls. Honda recognizes general estimated warranty costs at the time products are sold to customers. Honda also recognizes specific estimated warranty program costs when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. These provisions are estimated based on historical warranty claim experience with consideration given to the expected level of future warranty costs as well as current information on repair costs. Provision for product warranties are utilized for expenditures based on the demand from customers and dealers.

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HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

(8) Sales Revenue

As stated in Note 4, Honda has four reportable segments: Motorcycle business, Automobile business, Financial services business and Life creation and other businesses.

The sales revenue disaggregated by geographical markets based on the location of the customer and the reconciliation of the disaggregated revenue with the four reportable segments for the three months ended June 30, 2019 and 2020 are as follows:

For the three months ended June 30, 2019

	Yen (millions)
	Motorcycle Business		Automobile Business		Financial Services Business		Life Creation and Other Businesses		Total
Revenue arising from Contracts with Customers
Japan	¥	18,490	¥	393,752	¥	28,995	¥	19,694	¥	460,931
North America		48,734		1,537,646		325,564		33,831		1,945,775
Europe		47,822		92,409		—		13,477		153,708
Asia		338,200		549,878		3		10,065		898,146
Other Regions		79,771		120,178		—		3,289		203,238
Total	¥	533,017	¥	2,693,863	¥	354,562	¥	80,356	¥	3,661,798
Revenue arising from the other sources*		1		615		333,839		—		334,455
Total	¥	533,018	¥	2,694,478	¥	688,401	¥	80,356	¥	3,996,253

For the three months ended June 30, 2020

	Yen (millions)
	Motorcycle Business		Automobile Business		Financial Services Business		Life Creation and Other Businesses		Total
Revenue arising from Contracts with Customers
Japan	¥	19,353	¥	284,078	¥	31,544	¥	10,321	¥	345,296
North America		45,505		509,750		217,750		28,939		801,944
Europe		34,767		42,609		—		11,928		89,304
Asia		146,625		337,874		1		9,681		494,181
Other Regions		27,083		30,690		—		2,879		60,652
Total	¥	273,333	¥	1,205,001	¥	249,295	¥	63,748	¥	1,791,377
Revenue arising from the other sources*		889		4,922		326,539		48		332,398
Total	¥	274,222	¥	1,209,923	¥	575,834	¥	63,796	¥	2,123,775

Explanatory notes:

* Revenue arising from the other sources primarily includes lease revenues recognized under IFRS 16 and interest recognized under IFRS 9.

7

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

(9) Fair Value

(a) Definition of Fair Value Hierarchy

Honda uses a three-level hierarchy when measuring fair value. The following is a description of the three hierarchy levels:

Level 1	Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date
Level 2	Inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly
Level 3	Unobservable inputs for the assets or liabilities

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest input that is significant to the fair value measurement in its entirety. Honda recognizes the transfers between the levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

(b) Method of Fair Value Measurement

The fair values of assets and liabilities are determined based on relevant market information and through the use of an appropriate valuation method.

The measurement methods and assumptions used in the measurement of assets and liabilities are as follows:

(Cash and cash equivalents, trade receivables and trade payables)

The fair values approximate their carrying amounts due to their short-term maturities.

(Receivables from financial services)

The fair value of receivables from financial services is measured primarily by discounting future cash flows using the current interest rates applicable for these receivables of similar remaining maturities. Fair value measurement for receivables from financial services is classified as Level 3.

(Debt securities)

Debt securities consist mainly of mutual funds, corporate bonds, local bonds and auction rate securities.

The fair value of mutual funds with an active market is measured by using quoted market prices. Fair value measurement for mutual funds with an active market is classified as Level 1.

The fair values of corporate bonds and local bonds are measured based on proprietary pricing models provided by specialists and/or market makers and the models obtain a wide array of market observable inputs such as credit ratings and discount rates. Fair value measurements for corporate bonds and local bonds are classified as Level 2.

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HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

The subsidiary’s auction rate securities are A to AAA rated and are insured by qualified guarantee agencies, and reinsured by the Secretary of Education and the United States government, and guaranteed at approximately 95% by the United States government. To measure fair value of auction rate securities, Honda uses a third-party-developed valuation model which obtains a wide array of market observable inputs, as well as unobservable inputs including probability of passing or failing auction at each auction. Fair value measurement for auction rate securities is classified as Level 3.

(Equity securities)

The fair value of equity securities with an active market is measured by using quoted market prices. Fair value measurement for equity securities with an active market is classified as Level 1.

The fair value of equity securities with no active market is measured mainly by using the comparable company valuation method and other appropriate valuation methods. Fair value measurement for equity securities with no active market is classified as Level 3. In addition, in the case that cost represents the best estimate of fair value, fair value for the equity securities with no active market is measured at cost.

Price book-value ratio (PBR) of a comparable company are used as a significant unobservable input in the fair value measurement of equity securities classified as Level 3. The fair value increases (decreases) as PBR of a comparable company rise (decline). Such fair value measurements are conducted in accordance with the group accounting policy approved by the appropriate person of authority and based upon valuation methods determined by personnel in accounting divisions of Honda.

(Derivatives)

Derivatives consist mainly of foreign currency forward exchange contracts, foreign currency option contracts, currency swap agreements and interest rate swap agreements.

The fair values of foreign currency forward exchange contracts and foreign currency option contracts are measured by using market observable inputs such as spot exchange rates, discount rates and implied volatility. The fair values of currency swap agreements and interest rate swap agreements are measured by discounting future cash flows using market observable inputs such as LIBOR rates, swap rates, and foreign exchange rates. Fair value measurements for these derivatives are classified as Level 2.

The credit risk of the counterparties is considered in the valuation of derivatives.

(Financing liabilities)

The fair value of financing liabilities is measured by discounting future cash flows using interest rates currently available for liabilities of similar terms and remaining maturities. Fair value measurement of financing liabilities is mainly classified as Level 2.

9

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

(c) Assets and Liabilities Measured at Fair Value on a recurring basis

Assets and liabilities measured at fair value on a recurring basis as of March 31, 2020 and June 30, 2020 consist of the following:

	Yen (millions)
As of March 31, 2020	Level 1		Level 2		Level 3		Total
Other financial assets:
Financial assets measured at fair value through profit or loss:
Derivatives
Foreign exchange instruments	¥	—	¥	19,215	¥	—	¥	19,215
Interest rate instruments		—		76,589		—		76,589
Total		—		95,804		—		95,804
Debt securities		18,175		34,949		5,224		58,348
Financial assets measured at fair value through other comprehensive income:
Debt securities		—		9,069		—		9,069
Equity securities		78,493		—		99,508		178,001
Total	¥	96,668	¥	139,822	¥	104,732	¥	341,222
Other financial liabilities:
Financial liabilities measured at fair value through profit or loss:
Derivatives
Foreign exchange instruments	¥	—	¥	24,834	¥	—	¥	24,834
Interest rate instruments		—		90,334		—		90,334
Total		—		115,168		—		115,168
Total	¥	—	¥	115,168	¥	—	¥	115,168

There were no transfers between Level 1 and Level 2 for the year ended March 31, 2020.

	Yen (millions)
As of June 30, 2020	Level 1		Level 2		Level 3		Total
Other financial assets:
Financial assets measured at fair value through profit or loss:
Derivatives
Foreign exchange instruments	¥	—	¥	19,826	¥	—	¥	19,826
Interest rate instruments		—		86,218		—		86,218
Total		—		106,044		—		106,044
Debt securities		20,794		35,718		5,279		61,791
Financial assets measured at fair value through other comprehensive income:
Debt securities		—		9,388		—		9,388
Equity securities		86,049		—		98,928		184,977
Total	¥	106,843	¥	151,150	¥	104,207	¥	362,200
Other financial liabilities:
Financial liabilities measured at fair value through profit or loss:
Derivatives
Foreign exchange instruments	¥	—	¥	20,613	¥	—	¥	20,613
Interest rate instruments		—		94,794		—		94,794
Total		—		115,407		—		115,407
Total	¥	—	¥	115,407	¥	—	¥	115,407

There were no transfers between Level 1 and Level 2 for the three months ended June 30, 2020.

10

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

There were no significant effects of the measurements on profit or loss or other comprehensive income in Level 3 assets and liabilities measured at fair value on a recurring basis for the three months ended June 30, 2020.

(d) Financial Assets and Financial Liabilities measured at amortized cost

The carrying amounts and fair values of financial assets and financial liabilities measured at amortized cost as of March 31, 2020 and June 30, 2020 are as follows:

	Yen (millions)
	As of March 31, 2020				As of June 30, 2020
	Carrying amount		Fair value		Carrying amount		Fair value
Receivables from financial services	¥	5,161,165	¥	5,173,553	¥	4,947,307	¥	5,052,004
Debt securities		62,204		62,210		39,141		39,141
Financing liabilities		7,469,686		7,408,800		7,643,555		7,742,575

The table does not include financial assets and financial liabilities measured at amortized cost whose fair values approximate their carrying amounts.

11

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

(10) Contingent Liabilities

Claims and Lawsuits

Honda is subject to potential liability under various lawsuits and claims. Honda recognizes a provision for loss contingencies when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Honda reviews these pending lawsuits and claims periodically and adjusts the amounts recognized for these contingent liabilities, if necessary, by considering the nature of lawsuits and claims, the progress of the case and the opinions of legal counsel.

With respect to product liability, personal injury claims or lawsuits, Honda believes that any judgment that may be recovered by any plaintiff for general and special damages and court costs will be adequately covered by Honda’s insurance and provision. Punitive damages are claimed in certain of these lawsuits.

After consultation with legal counsel, and taking into account all known factors pertaining to existing lawsuits and claims, Honda believes that the ultimate outcome of such lawsuits and pending claims should not result in liability to Honda that would be likely to have an adverse material effect on its consolidated financial position or results of operations.

Loss related to airbag inflators

Honda has been conducting market-based measures in relation to airbag inflators. Honda recognizes a provision for specific warranty costs when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. There is a possibility that Honda will need to recognize additional provisions when new evidence related to the product recalls arise, however, it is not possible for Honda to reasonably estimate the amount and timing of potential future losses as of the date of this report.

12

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

(11) Earnings Per Share

Earnings per share attributable to owners of the parent for the three months ended June 30, 2019 and 2020 are calculated based on the following information. There were no significant dilutive potential common shares outstanding for the three months ended June 30, 2019 and 2020.

	2019		2020
Profit (loss) for the period attributable to owners of the parent (millions of yen)	¥	172,302	¥	(80,871	)
Weighted average number of common shares outstanding, basic (shares)		1,759,566,817		1,726,618,878
Basic earnings (loss) per share attributable to owners of the parent (yen)	¥	97.92	¥	(46.84	)

(12) Dividend

(a) Dividend payout

For the three months ended June 30, 2019

Resolution	The Board of Directors Meeting on May 8, 2019
Type of shares	Common shares
Total amount of dividends (millions of yen)	49,287
Dividend per share (yen)	28.00
Record date	March 31, 2019
Effective date	June 3, 2019

For the three months ended June 30, 2020

Resolution	The Board of Directors Meeting on May 12, 2020
Type of shares	Common shares
Total amount of dividends (millions of yen)	48,363
Dividend per share (yen)	28.00
Record date	March 31, 2020
Effective date	June 3, 2020

(b) Dividends payable of which record date was in the three months ended June 30, 2020, effective after the period

Resolution	The Board of Directors Meeting on August 5, 2020
Type of shares	Common shares
Resource for dividend	Retained earnings
Total amount of dividends (millions of yen)	18,999
Dividend per share (yen)	11.00
Record date	June 30, 2020
Effective date	September 4, 2020

(13) Approval of Release of Condensed Consolidated Interim Financial Statements

The release of the condensed consolidated interim financial statements was approved by Takahiro Hachigo, President and Representative Director, Chief Executive Officer and Kohei Takeuchi, Senior Managing Director and Chief Financial Officer on August 6, 2020.